Write your Financial Statement Analysis.

Write your Financial Statement Analysis.Consider being in the role of a financial analyst or financial planner. You have a new client with a significant investment in Starbucks because they love coffee. This client is interested in increasing their investment in Starbucks, but they would like to know if it is a good financial decision.
Please provide for this client an estimation of the intrinsic value of Starbucks using the discounted cash flows (DCF) model and a recommendation as to whether they should buy additional shares, sell some or all of their shares, or just hold their current shares.
Follow the instructions on the following pages to complete the exam. You will need these instructions, the “Final Exam Valuation Workbook”, and Starbucks’s 2021 annual report (form 10-K). Please read and follow all of the instructions carefully. Use the Excel workbook for all of your valuation calculations. This workbook will be uploaded to iLearn separately but is a critical component of the exam. Finally, the form 10-K (annual report) should be all of the supplemental information you need to complete the exam. However, if you consult any outside sources (even if you do not quote them), you must cite them in your written recommendation. Any standard citation format will be accepted.
Marist College Acct 330 Spring 2021 Dr. Craven
ACCT 330N
Fall 2021
Requirement 1
Using the excel document provided, calculate the intrinsic value per share common share of Starbucks using the discounted cash flows model (Module 13) on the “DCF Valuation” tab. The relevant 2021 financial statements for Starbucks have been provided in the Excel document.
The weighted-average cost of capital (WACC) has been calculated (9.27%) and embedded in the Excel document. The “DCF Valuation” pulls the WACC from the “WACC” tab, provides the discount factors for the time-value-of-money calculations, and includes the additional, auto- calculating table for the sensitivity analysis. The market capitalization ($136.948 billion) and the market price per share ($116.73) for Starbucks as of 12/12/2021 are provided, and these figures should be used as the comparison for your analysis.
Use the following assumptions to complete the forecasting information for the discounted cash flow model on the “Quick Forecast” tab:
A horizon period of 4 years will be used (2022 through 2025), and the forecast for the fifth year (2026) will be used as the terminal year.
Assume a statutory tax rate of 22% as noted. Otherwise, use the appropriate implied tax rate.
Net Operating Profit Before Tax (NOPBT) (Operating Income) is projected to grow from its 2021 level and have a growth rate between 9% and 15% for the entire horizon period and into the terminal period.
Operating Assets are projected to grow from their 2021 level and have a growth rate between 1% and 3% for the entire horizon period and into the terminal period.
Operating Liabilities are projected to grow from their 2021 level and have a growth rate between 2% and 6% for the entire horizon period and into the terminal period.
The terminal growth rate is projected to be approximately half of the NOPBT growth rate. Therefore, it is expected be between 4.5% and 7.5%.
Marist College Acct 330 Spring 2021 Dr. Craven
ACCT 330N
Fall 2021
Requirement 2
Provide a short (about 500 word) recommendation to your client as to whether they should buy additional shares, sell some or all of their shares, or just hold their current shares. This recommendation should clearly state the suggested course of action and provide support for this decision using the valuation and other information about the company and its environment.
• Provide an explanation of the valuation estimate and estimation process.
o Briefly describe your process for determining the inputs of the discounted cash flows model (i.e. NOPAT growth, NOA growth, terminal growth) and why you selected those input assumptions.
o Explain why you believe the output is a reasonable estimate of the “true” intrinsic value of the company and its shares.
• Compare your estimation of the intrinsic value of Starbucks’s common stock to its current market price. (Please use the market value provided of $116.73)
o Report the overvaluation, undervaluation, or appropriate valuation of Starbucks’s common stock by the market.
o Describe what this comparison implies for the future market price of the common shares of Starbucks.
• Make a recommendation to your client to buy additional shares, sell some or all of their shares, or just hold their current shares.
o Explain how your estimate of the valuation of the company is consistent with this recommendation.
o Support your recommendation using two or more relevant items of information from the financial statements and/or analysis of the operations of the company or its business environment.

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